There has been a spike in investments in digital avenues compared to physical assets. Traditionally, Indian investors prefer to invest their money in physical assets compared to financial ones. However, retail investors were aware of financial and medical crises during the pandemic, which opened the way to the stock market and other digital investment avenues.
Among all digital investment avenues, e-commerce has seen exponential growth recently. While e-commerce has had a presence in India since 2000, discount brokerages accounted for about 59 percent of active accounts in FY23, a recent report by 1Lattice highlighted.
Zerodha and Groww have the largest share in terms of number of active customers. Zerodha held about 20 percent market share among top brokers in terms of active accounts.
Groww followed with 16 percent market share, Angel One with 13 percent market share and Upstox with 9 percent share. Top legacy players like HDFC, Kotak, ICICI, Axis, IIFL, Motilal Oswal and Sharekhan together held about 18 per cent market share, the report said.
Online investment in physical assets offers high asset liquidation, various options, transparency in charges, less touch and feel and time saving as compared to offline mode. Easy and convenient investment, less service costs and end-to-end service availability on a single platform attract people to online investment for financial assets.
The “Digital India” movement in 2015 gave a boost to digital investment market. In recent years, many new players have entered the wealth management space in the discount brokerage and cryptocurrency segment and have been able to capture considerable market share.
Among various other digital avenues, there has also been a rise in cryptocurrency and digital gold investments. Cryptocurrency trading was legalized in 2020 by the Supreme Court of India, which saw a sudden surge of investments in the avenue. While gold has remained an attractive investment option over the years, 2021 has seen a drastic increase of around 70 percent in the purchase of digital gold.
Dip in bank deposits
There has been a slight decline after the Covid19 pandemic and slower growth in bank deposits at present, due to availability for options such as mutual funds and stocks, where higher returns are expected. Overall, in the past 5-6 years, bank deposits have seen slower growth due to a shift towards securities, the report said.
Amidst COVID 19, there has been a drop in interest rates for fixed deposits, PPFs, and other small savings schemes as well.
Reserve Bank of India repo rates, however, recovered to pre-pandemic levels in FY23 after the record low fall to 4 percent in FY21 and 22 caused by the severe economic downturn, the report added.
Gold remained an attractive investment choice
One of the most traditional investment instruments among Indians, Gold continues to be an attractive choice even today. There has been a steep rise in gold investments since the global economic slowdown in 2008, the 1Lattice report highlighted.
Gold has outperformed stocks, amidst the current geopolitical crisis and recession, thus proving to be a reliable choice in times of market decline. There was a return of around 4.1% of MCX Gold compared to 1.1% return of BSE Bond index from January-September 2022, the report added.
Gold has less volatility compared to the stock investments in the long term, causing it to remain an attractive investment option. An inclination towards digital gold from online gold investment platforms has been witnessed due to ease and convenience of investing.